The Economic Data Global Express (e-EDGE)

v.5 n.50       Released Dec. 10, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

WHAT IF THE FED DOES NOT CUT INTEREST RATES TOMORROW?...

     Let us suppose that the financial futures market is wrong and the Federal Open Market Committee decides to hold the Fed Funds Rate (FFR) at its current 2.00% target at tomorrow's meeting.  What kind of signal would such an action send to the markets?  How would you interpret the Fed's view of economic conditions, especially the timing of recovery from this recession, which is already eight months old?
     Absent the magic wand in "Harry Potter and the Sorcerer's Stone", we need to go back to fundamental economic analysis to answer these questions.  The policymakers at the Fed will be looking at the following:
     -- The arbiter of American business cycles, the National Bureau of Economic Research (NBER), has declared that the economy is officially in recession and the downturn started as early as March 2001.  So, anyone who has been feeling downcast and downtrodden by the economy's malaise all year long need not apologize.
     -- The spillover effects of large job losses in October and November have to be worrisome--falling consumer confidence, rising mortgage delinquencies, lackluster retail sales, and higher unemployment insurance claims.
     -- The effects of the 9/11 terrorist attack may take a long time. Any widening of the war against terrorism beyond Afghanistan will prolong the atmosphere of trauma and insecurity.
     -- The global economic situation has worsened in recent weeks--Argentina is in "technical default" on its international debt and has imposed capital controls on its banking system and currency regime.  Japan has seen its debt rating downgraded again by risk-rating agencies.
     -- US. corporate profits are still looking dismal and this may keep any upward momentum in the stock market from staying on track.
     If the Federal Reserve's forecast is for the U.S. economy to remain in recession through the first quarter of 2002, a decision to cut interest rates by 25 basis points is the likely outcome of tomorrow's meeting.  Although this action might be perceived as mainly symbolic, it will clearly acknowledge the Fed's level of concern about the current slump.  So, watch for another cut in the FFR to 1.75%.  (Ken Ackbarali)
 

MORE DREARY LABOR MARKET NEWS IN NOVEMBER

     The Bureau of Labor Statistics released its monthly labor market report for November last Friday and the results were quite gloomy.  Nonfarm employment plunged by 331,000 jobs last month, following revised declines of 468,000 and 165,000 jobs in October and September.  Together, these three months were the worst for employment since the recession of 1980.  The nation has lost a total of 1.2 million jobs since the recession began in March.  Many industries cut jobs last month, though the biggest losses came in manufacturing and help supply services (or temporary help) firms.  Industries adding jobs in November included health services and financial institutions.
     Results of the Bureau's survey of households were just as ugly as the employer survey.  The nation's unemployment rate rose to 5.7% in November from 5.4% in October and 4.9% in September.  The two-month jump of 0.8 percentage points also was the worst since the 1980 recession (which was short but very nasty).  No group was spared last month.  Jobless rates increased for all age, race, ethnic, and educational categories.  The number of unemployed persons has risen by about 2.5 million over the past 12 months.  Most--1.8 million of them--were laid off by their employers and were identified as "permanent job losers" in BLS-speak.  The number of long-term unemployed (for more than six months) also has risen, from 10.7% to 14.3% of the unemployed.  Both parties in Congress want to extend the time period over which the jobless can receive unemployment compensation (currently 26 weeks).  However, that action is caught up in the tangle of disagreements over the rest of the economic stimulus package.  (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 
 

NOVEMBER AUTO SALES BOTH GOOD AND BAD

     First, the good news:  retail automotive sales were strong last month.  At 18.0 million (seasonally adjusted annual rate or SAAR), November's sales of cars and light trucks were the third highest seen over at least the past decade.
     Then, the (not-so) bad news:  November's sales were below October's all-time record of 21.1 million light vehicles (SAAR).  Most observers had expected this result.  Buyers most likely to respond to zero-percent financing did so in October.  Also, the unprecedented promotions cleared out dealers' stocks of older models, so manufacturers have reduced the number of models available under their zero-percent programs.
     Finally, the bad news:  when reported on Thursday (12/13), total retail sales in November will appear to be weaker than they really were and may well have declined from October.  The same pattern may show up in the November consumer spending report to be issued the following week (Friday, 12/21).  Remember to pay attention to the details beneath the headlines.  (Nancy D. Sidhu)
 

SEPTEMBER TRADE VALUES STILL SLIDING

     The monthly trade value report from the U.S. Department of Commerce is not fun reading, as the September numbers continued to slide.  At the Los Angeles Customs District, export values were off 20.2% over the year, while import values were down by 9.3%.  Total two-way trade value at Los Angeles declined by 12.7% in September, and the 9-month total is behind last year's by 4.8%.
     The San Francisco District's September numbers were even more depressing.   Export values were down by 36.6%, while imports tumbled by 46.4%.  For the month, total trade value was off by 42.0%, and the 9-month total was down by 19.0%.   At the San Diego District, export values in September dropped by 10.9%, imports slipped 17.9%, with the month's two-way trade total off by 15.5%.  For 9 months, San Diego's trade value was off by 4.0%.  (Jack Kyser)
 

LAWA AIRPORT DATA

     As things get back to what passes for normal these days, data is once again coming from LAWA.  At Los Angeles International (LAX), total passenger traffic in September declined over the year by 33.1%, while October fell by 28.8%.  International passenger counts at LAX were off by 30.9% and 34.3%.  LAX's air cargo tonnage was also down, with a 23.5% decline in September followed by an 18.2% slippage in October.  International air cargo tonnage continued weak, with September down by 7.8% over the year, and October off by 17.5%.
     At Ontario International, the September passenger count was down by 27.4%, but October was off by just 8.9%.  Air cargo at ONT dropped by 12.5% in September, but recovered in October with a 12.5% increase.  (Jack Kyser)
LAX data: http://www.lawa.org/statistics/tcom-1001.pdf
 

NEW HOMEBUILDING IN OCTOBER STILL MIXED

     According to the Construction Industry Research Board, new homebuilding in California bounced back during October from depressed levels of activity in September.  However, all of the October increase was in the residential sector.  While the number of housing permits issued in the state in October was up over both the year and previous month, the 10-month total of 123,670 units was down by 0.4% from the comparable 2000 number.
     Around Southern California, activity in Los Angeles County picked up with the 10- month total up by 11.1% over last year.  The Riverside-San Bernardino area also turned in a good performance in October, and its 10-month total was up by 23.0%.  San Diego County also had a good month, and its 10-month total has come back, down by just 0.8% from the like period of last year.  However, Orange and Ventura counties continued to turn in lackluster performances.  Orange County's 10-month total trailed last year by 35.5% and Ventura County is down by 8.1%.
     On the other hand, new homebuilding in the Bay Area remained weak.  At the 10-month mark, the Oakland area was 14.9% behind last year, San Francisco was off by 42.9%, and San Jose was down by a comparatively modest 16.9%.  (Jack Kyser)
 

NONRESIDENTIAL A MIXED BAG IN OCTOBER

     Not much change in trend in the October nonresidential permit data from the Construction Industry Research Board.  In Los Angeles County at the 10-month mark, industrial and retail permit values continued to lag last year, by 47.9% and 1.2%, respectively.  New office permits continued to run ahead, but the growth advantage narrowed.  In Orange County, office and retail continued to trail, with declines of 43.9% and 12.2% respectively.  New industrial continued to run ahead, by 17.9%, but again the advantage is shrinking.
     In the Riverside-San Bernardino area, at the 10-month mark, new industrial permit values were down by 26.2% while retail was off by 16.3%.  However, new office construction was ahead by 45.2%, which is starting to cause some concern.  In San Diego County through October, industrial was behind by 47.0% while retail was off by 22.3%.  Office permit values have turned positive, up by 7.2%.  Ventura County to date in 2001 was behind in only the office sector (by 6.7%).  For 10 months, industrial was ahead by 38.8% and retail (on a small base) by 175.0%.
     In the Bay Area, caution has finally crept into nonresidential development activity.  New industrial permit values in the 9 counties at the 10-month mark are now behind last year by 30.5%, while office activity was down by 31.6%.  Only retail was ahead, by 27.1%, with the San Jose being the culprit.  (Jack Kyser)
 

NOVEMBER LOCATION PRODUCTION DAYS DOWN

     The November report from the Entertainment Industry Development Corporation pointed to continued tough times in Tinseltown.  Off lot production days during the month were 39.6% below the year-ago level.  The news by segment was pretty bad, with feature film activity down by 57.3% while TV was off by 32.8%.  Thus commercial activity's decline of 8.4% didn't look too bad.  Year-to-date, location production days are still ahead by a measly 1.5%.  This report also hints that Novembers motion picture employment numbers will be lousy.  (Jack Kyser)
 

QUICK STATS:

* BLS: US labor productivity for 3Q01: +1.5% (2Q01: +2.1%)
* BLS: US unit labor costs for 3Q01: +2.3% (2Q01: +2.6%)
* BLS: US unemployment rate for 11/01: 5.7% (10/01: 5.4%)
* BLS: US nonfarm employment for 11/01: -331,000 (10/01: -468,000)
* Census: US new factory orders for 10/01: +7.1% (9/01: -6.5%)
* Census: US factory orders shipments for 10/01: +2.2% (9/01: -4.7%)
* Census: US unfilled factory orders for 10/01: +0.8% (9/01: -1.9%)
* Census: US factory inventories for 10/01: -0.4% (9/01: -0.9%)
* Fed: US consumer credit for 10/01: +5.2% (9/01: +1.5%)


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